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sharing in governance of extractive industries

Tanzanian Mining-sector Governance in the context of “Magufuli the Unexpected”

Governance can be thought of, generically, as "the lateral and inter-institutional relations in administration.." ... or, alternatively, the "manner through which power is exercised in the management of a country’s economic and social resources for development".  The concept of governance is applicable to the public (Government), private (Companies) and third sector (NGOs) sectors alike. In this GOXI post I consider it in a Tanzanian Government context, focusing in on the mining sector in that country.

Tanzania is categorised as a unitary presidential democratic republic, the President of the country is both Head of State and Head of Government.  Tanzania's first (1964 - 1985) President, Julius Kambarage Nyerere, has been described as "one of Africa’s most respected figures, Julius Nyerere (1922 – 199... and "father of the nation”; he remains a political icon, not just in Tanzania but across Africa.

Tanzania's Presidents tend to dominate the nation's politics.  Thus far, all of them have been from the same party: that is the Chama Cha Mapinduzi (CCM), which translates as the Party of the Revolution, and its (mainland) predecessor, the Tanganyika Africa National Union, which merged with Afro-Shrazi Party (of Zanzibar) in 1977 to form the CCM.  The United Republic of Tanzania comprises, dating from the merger of 1964, the: archipelago of Zanzibar; plus mainland (& continental) Tanzania, formerly the sovereign state of Tanganyika - of which Nyerere was also its first, and only, President (1962-64).

Dr. John Joseph Magufuli, the CCM candidate, won the 2015 presidential election and became President Magufuli in November of that year.  He is commonly referred to as “the Bulldozer,” a soubriquet that both pays homage to his delivery of massive road building across his country, but also refers to his somewhat brusque way of doing things in general. He has also been called "Magufuli the Unexpected": only three years ago, in 2015, he was seen as the “accidental" CCM candidate; CCM's competing factions, e.g. supporters of the “inevitable” CCM candidate former-Prime Minister Edward Lowassa, were at loggerheads, and Magufuli came through the middle as the mutually acceptable compromise.  Since then, his no-holds-barred personality has loomed large over Tanzania's politics; as a first-term President he has already been repeatedly called upon by his supporters for to run for not just a second but also a third five year-term, a change which would require a change in the law. "Bucking a trend in the region" he has repeatedly rejected this idea... of course, he still has plenty of time to change his mind before 2025. 

President Magufuli

Public Sector Governance under Magufuli - Contested State

Magufuli has been quick to announce high-profile anti-corruption measures to improve governance in Tanzania. For example and in a high-profile move, he sacked 9,700 "ghost worker" civil servants in 2016, and a further 9,900, identified as touting fake academic qualifications, the following year.  A majority of Tanzanians agree that the anti-corruption drive, highly mediatised, is actually being effective: a May 2017 survey indicted that over 70% of respondents believed that corruption had fallen “somewhat” or “a lot” in the previous year, an unprecedented turnaround from the previous year when the corresponding figure was just 13%. 

The headline Tanzania @56: echoes of the best & worst of Nyerere under Magufuli, balances both the concerning (see below) and more welcome (see above) governance developments observed since 2015. Between different commentators and active participants, the question is in fact highly contested.

If equity is indeed considered as part of governance, then the following, and somewhat-theatrical, example of individual civil servants' live on-air sackings, undercut that claim of fairness: in November 2018 "Magufuli used a live broadcast from a small town in the north of the country summarily to dismiss two officials after they failed to remember instantly details in their budgets. When one protested that she couldn’t reasonably be expected to be able to recall every figure, Mr Magufuli told her, 'You can’t talk to me like that.'" The wider context for such high-handedness is an unprecedented stifling of dissent, highlighted and articulated in a joint statement of 105 Tanzanian NGOs in February 2018; Alliance for Change and Transparency (opposition) party leader Zitto Kabwe in his article Tanzania: from Democracy to Autocracy? makes the Magufuli mis-governance case in unambiguous terms.

GOXIans can make up their own minds either way.  I will remain studiously neutral.

What does this mean for the nation's mining sector governance?  The below illustrative case study given is that of Acacia Mining.

Reflective of the praise that Magufuli attracts both domestically (including born of genuine sentiment) and internationally, African Arguments ran a headline article in July 2017 under the headline "Magufuli's Mining Reforms a Masterclass in Political Manoeuvring".  Of all Magufuli's "manoeuvrings" surely the most eye-watering was the$190bn combined fine, tax and interest bill “equivalent to four times (Tanzania’s) annual gross domestic product” levied in 2017 against Acacia Mining, a London-listed gold mining company which has all of its producing mines located in Tanzania. 

Magufuli's Acacia gambit has already led to the company agreeing to give up a 16% equity stake to the Tanzanian government, co-list on the Dar es Salaam (Tanzanian) stock exchange, and which may give up further ground to the Tanzanians as the company struggles to fund the money to pay a lower, but still very substantial, $300m “goodwill payment” to the Tanzanian government. In response to these demands, members of Acacia Mining’s longstanding management declared that they did not have the cash to pay the sum upfront, and, moreover, left the company shortly thereafter.  They did so rather than stick around and carry-through long term on an agreement negotiated by their majority owner, Barrick Gold Corp, and Magufuli’s government, an agreement internationally reported as “Barrick cedes gold assets in effort to settle Tanzanian dispute”.

The findings of two Tanzanian “Presidential Committees” (both initiated by Magufuli) were behind the $190bn fine; Acacia baldly listed in response “some of the key findings that are wrong”, including that the Government’s figures “imply that our (Tanzanian Bulyanhulu and Buzwagi) mines each produce more than 1.5 million ounces of gold per year; last year together they produced 450,000 ounces,” that these two mines would be the largest in the world by a 25% margin, and that “Acacia (would) produce more just (with) three mines than companies like AngloGold Ashanti produce from 19 mines, Goldcorp from 11 mines, and Kinross from their 9 mines”.The third mine in question is North Mara, and was the subject of “invasion” by Tanzanians occurring “over several days” and widely seen as Government-backed: a “violent clash is latest manifestation of conflict between Acacia Mining and Tanzanian government”. Seeking to stem a situation that had gone from bad to worse, Barrick Gold Corp, the majority beneficial owner of Acacia Mining, agreed to the above-related terms - perhaps understandably.

Foreign investors may consider that the above case study bodes ill for their future participation in Tanzania, however if Magufuli's manoeuvrings - of which the Acacia Mining experience is just part - are seen to help deliver economic benefit from Tanzanian mining  to the people of Tanzania, in line with the African Mining Vision (AMV) and the AMV Tanzanian national case study launched in 2017 (#AMVLaunchTz), then surely it is reasonable for Tanzanians to champion such mining governance outcomes? 

Certainly, there is latent demand for more "extractives for development" in practice in Tanzania, e.g. see the thoughts below of Dar es Salaam-based "Anti-corruption Champion| Tax & Climate Justice Activist" and tweeter Kamala Dickson.

Kamala Dickson on Twitter

Conclusions

Perhaps these intensely political, mining governance-focused, dividends will prove to be short-lived in nature?; as a tactical route to immediate financial and state participation advantages, the above indeed represents a "Masterclass"; however the country may lose out in terms of future Foreign Direct Investment (FDI) into its mining sector, and beyond, as a result of investors' sensing high above-ground risk relating to Tanzanian market entry. What can be said in certainty is that Magafuli has delivered immediate and tangible benefits to Tanzania from the approach he has taken; with the advent of Chinese interest in Tanzania's mining sector the country is also far less dependent upon specifically Western FDI monies, and therefore the logic of the "obsolescing bargain" may be also a factor in Magufuli's calculations too - it is too early to tell. 

Maybe by 2025, or should that be 2030 (?!), we will have much fuller answers as to what mining governance lasting legacy Magufuli is leaving to his country.

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